LOCAL BODY LOANS

Waikato Times, Volume 121, Issue 20346, 10 November 1937, Page 8

LOCAL BODY LOANS

HELP FROM GOVERNMENT ONLY FOR SMALLER BODIES STATEMENT BY HON. W. NASH POWER BOARD'S APPLICATION Statements to the effect that the additional loan moneys, mentioned in his Budget speech as being made available by the State Advances Corporation were for the assistance of smaller local bodies and not for the larger bodies, deemed capable of making their own loan arrangements, were contained in a letter received from the Minister of Finance, the 110/i. W. Nash, at the meeting of the Central Waikato Electric-Power Board to-day. The Minister’s letter was in reply to an application by the board to the corporation for a special loan of £17,500, part of the special loan, 1936, of £50,000, for which the board had been unable to secure satisfactory accommodation on the open market. There were present at to-day’s meeting, Messrs T. -Hinton (in the chair), j' J. Ryburn, N. Reid, G. Smith, S. S. Saulbrey, R. ‘G. Young, J. A. Sampson, W. -C. E. 'George, W. Henry, the secretary, Mr H. J. Beeche, and the engin-eer-manager, Mr J. R. Ellis. “In connection with your application for the Government to provide the necessary funds to finance the loan,” wrote the Minister, "you have no doubt seen the statement contained in the Budget to the effect that extra funds are being provided for the State Advances Corporation to assist in relieving the present difficulty experienced by some local bodies in arranging loan finance.

“ I would mention, however, that this extra money Is not intended to finance local bodies generally and It Is suggested that a power board of your standing should not experience a great deal of difficulty in floating its loan on the open market. “ You are requested to endeavour to do so in order to assist the Government in its efforts to maintain the rate bi interest in local body loans at 3i per cent., by allowing the extra funds provided by the corporation to be utilised for financing those local bodies whose securities do not meet with a ready sale on the open market. Independent Arrangement Suggested “ I think it would have been advisable for your board to have accepted the offer to take up the loan on the terms set out, and if this offer is still open, I would suggest that you do so. The expense of raising a renewal loan at the end of 10 years would probably not be excessive and it would result in the raising of your loan immediately. Also, the method of finance involved is quite general at present, as many lenders will not tie up their money for long periods at the present rate of interest.

“I trust that you will be able to arrange your finance in this manner and so assist tlie Government in its endeavours to maintain rates of interest for local body loans at the present favourable level,” Reply to Minister The following letter had been sent in reply to that from the Minister, stated the secretary, Mr H. J. Beeche: " As stated in my letter of September 29, this board has made extensive inquiries for tiie above loan before making application to you, and the only offer received was from a broker who was prepared to arrange for the money for a term of 10 years on the basis of u 20-year loan. “ Had this offer been received direct from a lender, my board would probably have considered it favourably, but it did not feel disposed to pay a brokerage fee of £B7 10s as well as heavy legal costs and also printing expenses for such a temporary loan. “My board appreciates to the full the efforts of the Government to maintain the present favourable interest rates. It would be pleased indeed if it were able to raise its loan at an economical cost on tiie open market, and thus leave the Government freer to deal with the smaller local bodies. “ Fop the first time In Its history, however, It has been unable to make satisfactory arrangements for Its loan requirements. “ It trusts, therefore, that you will give further and more favourable consideration to its application.”

The action of the secretary in making the reply quoted was endorsed by the board.